Falling for the eighth successive session, the rupee on Wednesday slumped to a nearly two-year low of 48.01 in early trade as lingering eurozone debt worries prompted importers, oil refiners and banks to make a beeline for buying the US dollar.
Ruling out any problem on domestic fundamentals, treasury managers in banks attributed the rupee's steep fall to the 48-level to international developments.
The decline in rupee's exchange value is however seen as a blessing in disguise for exporters who said they will "definitely benefit" and "it is a good news for them".
Share prices of Indian software exporters such as TCS, Infosys, and Wipro, who earn the major chunk of their revenue from the US in dollar, shot up on the BSE as a weak rupee will improve their bottomlines.
After the steep fall in morning trade the domestic currency rebounded to end the day 5 paise lower at 47.64/65.
Dealers said weak dollar overseas too helped the late rupee recovery.
At the Interbank Foreign Exchange (Forex) market, the local unit opened sluggish at 47.80/81 a dollar from overnight close of 47.59/60.
Taking a cue from bearish equities, it immediately touched nearly a two-year low of 48.01, level not seen since September 29, 2009, when it had touched a low of 48.11.
However, host of positive factors like, smart reversal in local equities, increased capital outflows amid feeble dollar overseas later supported the rupee and it bounced back to a high of 47.5950 before concluding at 47.64/65.
In straight seven sessions of losses, the rupee has tanked by 185 paise or 4.04%.
Yes Bank Chief Economist Subadha Rao said that steep fall in rupee reflects the nervousness of the market on the crisis emanating from the eurozone and not in any way is suggestive of any fundamental problem on the domestic front.
"The lingering crisis in Greece and the trouble in the French banking system has to be blamed for the steep fall of the rupee," Rao said.
StanChart Chief Economist Samiran Chakraborty said the rupee has been falling since August on huge dollar demand from importers, which led to a spike in the dollar and the resultant shortage of the American greenback.
On whether RBI has to intervene in the market, Rao said that traders have been saying that there looked like some intervention. "Some leading PSU banks were very active in the forex market today, which brought down the huge volatility towards the end of the day."
However, she added that the local unit will continue to be weak till the dollar rise is arrested the eurozone worries are contained.
Echoing the view, Religare Enterprises Chief Economist Jai Shankar said, "Talks of RBI intervention contained to some extent the fall today. However, volatility will continue and he sees the local unit hitting a low 49 sooner than later. But the rupee fall will be of short-term nature."
The dollar index, gauging six major currencies, was trading lower by 0.17% while New York crude oil was quoting below $90 a barrel in European market on Wednesday.
The RBI fixed the reference rate for the dollar at Rs 47.8055 and the euro at Rs 65.1143.